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KunLun Game acquires TERA, debut test phase in October

July 16, 2013

Since early 2012, rumors have been emerging that Chinese game company KunLun Game would be the service provider for TERA in China. On July 16th, Kunlun Game officially announced their partnership with Bluehole Studio, developer of TERA, securing exclusive operation rights within mainland China. The company also claimed the licensing fee is $40m and freemium model will be employed.

KunLun Game is a private game developer and publisher, starting its business with browser games in 2008. Unlike other mid-tier game companies, more than half of the company's revenue comes from overseas markets such as Korea, Japan and Europe. Its subsidiaries employing local staffs in such regions strive to provide services that reflect the characteristics and preference of local players. Its browser games achieved great popularity in Korean and Japan, contributing around $70m to the company in 2012. Its expansion in the domestic Chinese market, however, looks to be squeezed by major publishers. Tencent, 4399 and Gamewave dominate the domestic browser games market currently and hundreds of portals with similar games portfolios are struggling to attract users through various promotions. KunLun's new licensed client games including Ragnarok Online and Martial Arts have to compete with other new hits such as Swordman Online via Perfect World and Monster Hunter OL via Tencent, which might bring potential risks for their monetization capacity.

TERA, which has proven its capability to gain traction with Japanese and Korean gamers, is expected to help Kunlun expand its market share within mainland China. Additionally, the blooming popularity of newly employed freemium model in Korea helps enhance KunLun's confidence to insist on free-to-play mode compared to initial subscription model in Korea.

However, the prospect of this success relies on the stability of servers and KunLun's ability to detect cheating software which is likely to be a major issue to cause failure. Shanda suffers great difficulties in avoiding cheating activities resulting in flat performance of Sudden Attack and AION, two popular titles in Korea. Also localization is important to licensed games.